Regional Matters

July 7, 2017

A Sectoral Look of Real Gross Domestic Product by State

Article by:Joseph Mengedoth

The most recent edition of Snapshot took a closer look at real gross domestic product (GDP) by state in 2016, which was recently released by the U.S. Bureau of Economic Analysis (BEA). Which industries in the Fifth District contributed the most to real GDP? How does that compare to employment by industry and which industries generate the most output per worker?

In the Fifth District as a whole, real GDP rose 1.3 percent in 2016, slightly lagging the national rate of 1.5 percent. At the state level, however, three jurisdictions outpaced the nation: the District of Columbia (2.4 percent), South Carolina (2.1 percent), and North Carolina (1.6 percent). Maryland and Virginia reported slower but still positive growth, while West Virginia saw a decline in real GDP of 0.9 percent. (See chart below.)

The sectors that drive economic growth vary by state. For example, in the District of Columbia, the professional and business services industry accounted for the second-largest share of total output in 2016 (second to the government sector) and contributed the most to the overall increase. In comparison, West Virginia’s economy is heavily reliant on the trade, transportation, and utilities, government, and natural resources sectors, all of which contracted in 2016. In fact, the only sectors to report positive real GDP growth in West Virginia were information and educational and health services. Explore the chart below to see how Fifth District jurisdictions differ in shares of total output by industry.

The industries that contribute the most to GDP, however, are not necessarily the largest employers. In the Fifth District, the financial services industry accounted for 8.5 percent of total employment in 2015 (the most recent year available from the BEA) but accounted for 18.5 percent of output in that same year (and 18.4 percent in 2016). Conversely, the education and health services industry accounted for 12.5 percent of 2015 employment in the District but only 7.9 percent of 2015 real GDP (and 8.0 percent of 2016 real GDP).

The same can be true at the state level. In North Carolina, for example, the manufacturing industry accounted for 19.7 percent of GDP in 2015 but only 8.5 percent of employment. In some instances, however, the same industry does drive both employment and contribution to GDP. The professional and business services industry in Virginia contributed the most to GDP in 2015, accounting for 19.6 percent of total output, and the industry also had the largest share (18.0 percent) of employment.

To account for output and employment simultaneously, a measure of real GDP per employee can be constructed. This indicator also serves as a measure of labor productivity by industry, i.e., the value that the average employee adds to the economy in a given industry. According to this calculation, District employees in the information industry added the most value, on average, in 2015.

In fact, GDP per employee was highest in the information industry in every state except for North Carolina and West Virginia; the information industry was a close second behind manufacturing in North Carolina and lagged behind financial services and natural resources in West Virginia. Additionally, outside of D.C., the manufacturing sector is consistently among the highest in terms of output per employee in almost all jurisdictions.

In contrast, the leisure and hospitality industry in the Fifth District reported the lowest output per employee, followed by the “other” services industry. And although natural resources employees were the second most productive in West Virginia, in the remaining District jurisdictions, the industry exhibited some of the lowest labor productivity.

Explore the chart below to see how this measure of productivity compares across states and how individual states compare to the U.S. and to the District.